Funds, Flows & Facts, April 2020

This quarterly update focuses on European Fund and Asset Management Association (EFAMA) data from Q4 2019. The next EFAMA data in June will show the impact of Covid-19. In 2019, net inflows of UCITS were €394bn compared to net inflows of €121bn in 2018. A summary of UCITS net inflows since 2015 is depicted in the chart below:

Net Sales of UCITS EUR Bln

Net assets of UCITS grew from €9.3tn to €11tn in 2020. EFAMA provided a breakdown of European fund ownership by investor type as follows: insurers/pension funds (42%), other financial intermediaries (24%) and households (24%).

In terms of investor location, Germany comprised of 23%, the UK 14% and France 14%. In terms of fund sales, 2019 began slowly as negative sentiment and fears over the global economy from 2018 carried over into 2019. However Central Bank (mainly The Fed) intervention through rate cuts and demand for safe haven assets were a key factor in bond fund sales being the bestselling UCITS category in 2019. Equity sales were negative for 8 months of 2019 but they bounced back in Q4, as trade tensions between the US and China eased and investor confidence returned.

Sources: EFAMA, Schroders, Broadridge.

Country Spotlight: Switzerland

Switzerland is a major centre for asset management and ranks 5th globally in terms of assets under management. Switzerland is also a significant fund domicile, ranked 7th in Europe in terms of net assets (CHF 1.2tn as at Feb 2020). Equity funds are the dominant asset class with 41% market share followed by bond funds with 32%. Switzerland is the 4th most popular market for the distribution of Irish funds:

2018: Top Countries: Number of Irish Funds Registered

Switzerland is a very diverse market in terms of fund distribution with private banking and direct face-to-face selling the dominant channels. Local players like UBS and Credit Suisse also operate large fund platforms.

On January 1 2020, Switzerland introduced a number of rule changes to how foreign asset managers can market and sell their funds in the country. One of the key changes is the removal of the requirement for asset managers to have a local representative and paying agent if they are targeting qualified investors such as pension funds or private banks. Firms targeting retail investors will still need to have a Swiss representative. Foreign sales staff are also no longer required to register with the Swiss regulator if targeting qualified investors.

Sources: Ignites, EFAMA, SFAMA, Irish Funds.

The Quarter in Numbers

0.9 The number in €tn of European ETF net assets Q4 19

0.8 The number in €tn of Euro Real Estate fund net assets Q4 19

152 The number in €bn of AIF net sales in 2019.

38 The percentage of European net assets in AIFs.

Irish eyes…

Irish domiciled fund assets increased by 25.9% in 2019 with Europe overall only up 16.8%. Net 2019 sales in Irish UCITS were more than double those of Lux, its nearest competitor.

Total Assets of Irish Domiciled Funds

In March 2020, ESMA communicated with national regulators including the CBI requesting they make it easier for regulated firms to meet their obligations during the Covid-19 crisis. The CBI confirmed that updates to Irish funds regulation will be paused including publication of feedback on CP130 (framework on treatment of fund errors). UCITS, MiFID and AIFMD compliant firms will be granted flexibility in relation to the filing of accounts and capital returns. The CBI has also cancelled scheduled visits to ManCos to probe CP86 compliance. Due to the crisis, the CBI has asked funds who it deems may run into liquidity problems to submit additional net redemption data.